The following is a brief summary of some of the issues buyers and borrowers in Louisville Kentucky and Indiana should be aware of and some timing recommendations â€“ there may be some variations, depending on your closing agent, attorney orÂ lender.
1.Â Homeowners Insurance. (a) You must bring to closing your homeowner's fire and extended coverage insurance policy or binder (policy) for your new home. The insured amount must be for at least (a) the sum of all new mortgages on your home or (b) its replacement cost. If you are going to rely on the 100% replacement cost, the policy must state that replacement cost is in effect. The policy must name all people who will own the house. Check to see that the mortgage clause adding the mortgagee's insurable interest to all policies is worded in strict compliance with the commitment letter issued your lender.
One week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.
2.Â Flood Insurance. The Seller Disclosure should have indicated whether the house you bought is in a within a specially designated federal flood hazard area. Don't rely on this â€“ go to the Jefferson County Kentucky Floodplain Determination site atÂ http://www.lojic.org/flood/user/welcome.htmÂ and check for yourself. If the home is located within flood zone then flood insurance is compulsory â€“ one week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.
3.Â Rent Loss Insurance. If this transaction involves a loan on investment property then rent loss insurance may be required â€“ check with your lender. If so, then one week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.
4.Â Title Insurance. Your lender will demand that you purchase for it a Lenders Title Insurance Policy to protect its interest in your home up to the amount of the mortgage. However your title interests are not covered by the lender's policy, so it is highlyÂ recommended that you purchase an Owners Title Insurance Policy. Your owner's policy remains in effect for as long as you own the property. It can be purchased within 30 days of closing.
The owner's policy has a standard form to which riders may be added. Check with your closing agent which policy is best for you and your circumstances. The policy will normally cover matters which were not discoverable by searching the land records. Examples of this include forged documents, the incapacity of a grantor, undisclosed or missing heirs, missing signatures, mistakes in recording, unknown creditors and problems involving access to the land.
Make Sure You Keep A Copy Of That Policy!Â There is at least one very large title underwriter which will not honor your claim unless you can produce your policy. The closing statement, proof of payment etc will not suffice. Be warned!
5.Â Condominium Insurance. If you are buying a condominium you must provide a Certificate of Insurance naming you and the condominium association and identifying the unit you are purchasing. You may be required to purchase additional insurance under certain circumstances â€“ speak to your lender and your insurance agent and if still uncertain call your closing agent or Realtor.
Here are some ways title to your home may be held:
1. Â Sole ownership: This form of ownership does apply to Kentucky. It is how a Kentucky individual holds title to real property; it does not apply to property acquired by married couples. However, if a married couple wants to put title in the name of his/her spouse, the deed could state that that spouse is the "sole owner."
2. Â Community property: This does not apply to Kentucky and Indiana, which is not a community property state. However in the 9 community property states in the USA (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) this is one of the primary ways in which couples hold real estate. In these states if a married couple acquires real estate and the deed stipulates that they are married, or if it does not clearly state how they intend to hold title, the law deems it to be a community property. Each spouse then has equal rights in the property and require the written agreement of the other to pass ownership in it.
3. Â Joint tenancy: This ownership form can be chosen when two or more people wish to have equal co-ownership of real estate. The deed then stipulates that the property title is taken by the co-owners as "joint tenants." Each joint tenant has a joint and several interest in the property (own all of it equally) . When a co-owner dies, his/her ownership interest passes automatically to the other co-owners. This is important because ownership passes by law, not by a will. So if there were originally, for example, 4 co-owners, and 3 die, the 4th and last surviving joint tenant ends up owning the entire property. So if one or both of the owners wants to be able to leave his share of the property to someone other than the person he/she co-owns with, joint tenancy should be precluded as a way to hold title.
4. Â Tenants in common: If property is held by two people and it is neither community property nor joint tenancy, then it is a tenancy in common, who are co-owners of the real property. However, unlike joint tenants, they may hold ownership in unequal shares, and each co-owner can pass his/her interest by a will.
The manner in which title is held has important legal implications and may affect how your property can be disposed of and also tax implications. Also, whatever your intention is regarding the disposition of your real estate after your death, do not rely upon your will to settle that â€“ make sure your deed reflects that intention.
1.Â Smoke Detector Ordinance. Depending on the county or city you live in, you or your seller may be required to execute a certification at the closing that the property has the requisite number and type of smoke detectors installed in the correct positions. Check with your realtor or with the fire department. In Louisville, Jefferson County, Kentucky for instance, the seller is required to certify in writing that the smoke detectors are either hard wired into the house or that they are powered by 10m year lithium batteries.
2. Â HUD 1 / Closing Statement.Â At the end of your closing you will be given a HUD1, otherwise known as a Closing Statement. After the closing, make sure you keep it in a secure place. Knowing where it is, even (and perhaps especially) 10 years later or more, may make the difference between selling your house or not. My previous blog deals with a difficult situation we were faced with last month when closing on a house in Louisville Kentucky.
The above information above is considered reliable, though not warranted. Laws change. Consult your attorney.